What’s next? – GOLD, OIL 08.11.17

GOLD

Gold futures were trading higher on Wednesday early hours as investors were cheered by upbeat economic data from the US and as all attention currently falls into the political scene.

On the Comex division of the New York Mercantile Exchange, gold futures were higher 0.16 percent to $1.277.90 a troy ounce as of 07:25 GMT.

Earlier in the session, China said exports increased by 6.9 percent year-over-year in October, falling short from an initially estimated 7.2 percent build. Imports were up by 17.2 percent, above the 16 percent growth forecast. The trade surplus dropped to $26.2 billion from $28.08 billion.

The yellow metal closed under pressure on Tuesday as safe-haven demand dropped in the light of less worries in the Middle East concerning its political stability.

The dollar was able to recover after a moderate two-day correction. By the time of this writing, the US dollar index, which gauges the greenback against six major rivals, traded at 94.80.

Gold is a dollar-backed commodity and therefore, a stronger currency makes it more expensive for market participants holding foreign money. Also, the precious metal performs best under periods of market stress and high uncertainty, which tend to boost demand for safe-havens.

Supporting the American currency were expectations that President Donald Trump’s tax reform bill will soon be passed in Congress, allowing to reduce the current 35 percent corporate tax rate to only 20 percent, a major change meant to push companies to bring earnings made abroad.

On the data front, the US Labor Department released its Job Openings and Labor Turnover Survey (JOLTs) report for September, which came in at 6.1 million vs 6.091 million expected.

In Europe, German industrial production for September fell 1.6 percent, more than an initially estimated 0.8 percent decline. EU retail sales rose 0.7 percent, above an expected 0.7 percent.

No relevant economic reports are scheduled for the day. Traders will keep an eye on the dollar as Trump moves forward with his Asia tour and heads to China.

OIL

Oil futures were lower as market players digested fresh industry estimates and looked ahead to official inventory data from the US Energy Information Administration later in the day.

The Energy Department will release its weekly report on crude and refined products stockpiles as of 15:30 GMT, with a forecasted decline of 2.876 million barrels for the week ended Nov 3.

The US West Texas Intermediate crude contracts were down 0.49 percent to $56.92 per barrel as of 07:25 GMT. Brent futures were down 0.49 percent, to $63.38 a barrel.

Overnight, the American Petroleum Institute (API) said crude inventories fell by 1.562 million barrels in United States last week, less than an expected draw of 2.7 million barrels.

Data also showed gasoline adding 520,000 barrels last week, against a 2.25 million barrels decline seen. Distillate inventories went down 3.133 million barrels, according to API data.

Crude benchmarks settled in red territory on Tuesday as OPEC leadership said North American shale producers are likely to increase their output in the near term. However, both WTI and Brent contracts continued to trade at their highest levels since 2015.

OPEC’s 2017 World Oil Outlook revised upwards its estimate for US shale oil to 5.1 million barrels per day (bpd) from an original 4.1 million bpd.

In a separate report, the Energy Information Agency said domestic crude production will increase by 720,000 bpd to 9.95 million bpd next year.

Ahead in the week, attention will be directed to Baker Hughes’ weekly oil rig count on Friday.

Fort Financial Services